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Geopolitical risk and the dynamics of REITs returns

Author

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  • Coën, Alain
  • Desfleurs, Aurélie

Abstract

The aim of this study is to analyze the relative importance of geopolitical risk (GPR), as introduced by Caldara and Iacoviello (2022), on the dynamics of U.S. REITs returns. Using an extended conditional version of Fama and French (1993)’s capital asset pricing model, we highlight the role played by GPR and its two components, geopolitical acts (GPA) and geopolitical threats (GPT), on the expected returns of securitized real estate. Our robust results report the level and the significant of the geopolitical risk metrics on the decomposition of REITs returns grouped into different portfolios (from CRSP/Ziman series). We shed light on the link between the characteristics of REITs and the relative importance of geopolitical risk during the last decades.

Suggested Citation

  • Coën, Alain & Desfleurs, Aurélie, 2024. "Geopolitical risk and the dynamics of REITs returns," Finance Research Letters, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:finlet:v:64:y:2024:i:c:s1544612324004677
    DOI: 10.1016/j.frl.2024.105437
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    More about this item

    Keywords

    Geopolitical risk; REITs; Asset pricing; Multifactor models; GMM;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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